Intercontinental Exchange (ICE) will have to sell energy and commodities trading platform Trayport, according to the UK Competition and Markets Authority (CMA), due to a potential to restrict market competitiveness.
A CMA investigation concluded that because of the $650 million acquisition of Trayport by ICE in December 2015 market participants had a "high level of dependence" on the platform due to weak alternatives and high barriers to entry, meaning ICE would be in a position to reduce competition between itself and its rivals leading to "increased fees for execution and clearing, and worse terms offered to traders." The launch of new products would also be hampered, while barriers to entry would be heightened, according to the CMA.
"We found that the merged company would have the ability and incentive to use its ownership of Trayport to restrict the competitiveness of ICE's rivals," Simon Polito, inquiry chair, said in a statement. "This could lead to a range of adverse consequences for traders and venues in the vitally important wholesale energy markets including higher prices, a general worsening of terms and quality and less innovative trading solutions. Having looked at this in detail and sought views from a range of market participants, we believe that the only effective way to preserve competition is to require ICE to sell Trayport."
ICE will now have to face the sale of the platform to a CMA-approved buyer having previously dismissed the recommendation of a sale, which it said was not "necessary, appropriate or in the best interests of Trayport's customers."
The exchange operator has maintained its position and raised the possibility of an appeal. "ICE is disappointed by the decision, having presented a compelling clearance case, and will now consider its options including the possibility of an appeal," ICE officials said a statement sent to WatersTechnology.
Anthony and James look at developments pertaining to the Consolidated Audit Trail and wonder if big-tech companies could challenge traditional asset managers.Subscribe to Weekly Wrap emails
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